Student loans can accrue quite quickly, and in many cases having multiple loans and multiple interest rates can result in unmanageable payments. Having many payments, each with a different due date can result in late payments, which means penalties and extra charges. In cases like this and even simply in cases where a former student has a great deal of unpaid student debt, student loan consolidation can be a worthwhile and beneficial option.
A loan consolidation program takes all the loans of a single type, meaning federal and private and combines them into one loan with one interest rate. This can result in significantly lower payments and a lower overall debt load. Consolidating federal loans allows you to defer payments if you decide to go back to school or to forebear them in the event of disability or economic hardship. This is not part of private consolidations, but even private loan consolidation saves borrowers a great deal of money. Because of the many benefits that come with consolidating federal loans, it is highly recommended that students not consolidate federal and private loans together, as they will lose the federal benefits that come with student loan consolidation.
Applying for student loan debt consolidation can be done through a private lender for private loans, or through the student loan websites for federal loans. Borrowers may apply online or via standard mail. Consolidation typically takes only one to two months from start to finish, and by consolidating, a student can be debt free in anywhere from one to four years. This is one of the many reasons why student loan consolidation is such a good idea, as it leaves only a short time after graduation until a borrower is financially independent.
There are very few requirements for student loan consolidation. Generally anyone who took out a federal loan is eligible, as long as they owe at least $20,000 in federal loans that are not in default status and are not enrolled half time or more in school. The criteria are generally the same for private loans as well, though you may want to check with the lender who will be consolidating your loans to be certain.
Consolidating student loans is worth considering. With lower interest rates and lower monthly payments, the loans are far easier to manage and are often repaid much quicker. Student loans are a necessary part of college, but after graduation, it may be a good investment in your future to combine them all into only one loan.